H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset...

H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.15 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2.23 million in annual sales, with costs of $1.25 million. If the tax rate is 23 percent, what is the OCF for this project? (Do not round intermediate calculations and round your answer to the nearest whole dollar amount, e.g., 32.)

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Expert Solution

Annual sales	2230000
(-) Annual costs	1250000
(-) Annual depreciation [ ( 2150000 - 0 ) / 3 ]	716667
Profit before tax	263333
(-) Tax @ 23%	60567
Net income	202767
(+) Annual depreciation	716667
Operating cash flow (OCF)	919433

jeff jeffy answered 2 years ago

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